(i) Short-term interest rate and its future path and risk premium (= liquidity premium) components are provided in the above table. Given this information, show the graph of the yield curve at December 2020 that includes associated numerical information such as maturity and level of interest rates (Hint: first compute the "?" parts in the table).

(ii) In financial markets we sometimes observe "inverted" yield curves. What is an inverted yield curve? Is the yield curve derived in (i) inverted or not? What factors could make a yield curve inverted?

2020 2022 Date 2021 Dec. 2023 Dec. Dec. Dec. short-term (=1year) interest rate path 1.0% 2.0% 3.3% 1year 2year 3year 0.0% 0.4% 0.4% Maturity Risk Premimum (or Liquidity Premiumu) Component Expectation Component Yield Curve ? ? ? ? ? ? 2020 2022 Date 2021 Dec. 2023 Dec. Dec. Dec. short-term (=1year) interest rate path 1.0% 2.0% 3.3% 1year 2year 3year 0.0% 0.4% 0.4% Maturity Risk Premimum (or Liquidity Premiumu) Component Expectation Component Yield Curve